Nearly two-thirds of China's underground water, and a third of its surface water, were rated as unsuitable for direct human contact in 2014, the environment ministry said on Thursday.
China is waging a "war on pollution" to reverse some of the environmental damage done by more than three decades of breakneck growth, but one of its biggest and costliest challenges is tackling contaminated water supplies.
China classifies its water supplies into six grades, and just 3.4 percent of the 968 surface water sites monitored by the Ministry of Environmental Protection met the highest standard of "Grade I" last year.
In an annual environmental bulletin, the ministry said just 63.1 percent of the monitored sites were ranked in "Grade III" or above, so rendering them fit for human use.
The rest were either completely unusable, or suitable only for use in industry or irrigation.
In 2013, the ministry ranked 71.7 percent of surface water in "Grade III" or above, but it is not clear if the figures are comparable.
The 2014 report also suggests China's underground water quality is worsening, with the ministry classifying 61.5 percent of the 4,896 underground water sites it monitored as either "relatively poor" or "very poor".
The corresponding figure for 2013 was 59.6 percent, based on samples from 4,778 sites.
In April, China promised to raise the proportion of good quality water (rated as "Grade III", or above) to more than 70 percent in its seven major river basins, and to more than 93 percent in its urban drinking supplies, by 2020.
It will ban water-polluting plants in industries such as oil refining and paper production by the end of 2016, it added.